An important foundation of the new growth theory is that

Question

Quizplus · Accepted Answer

The new growth theory emphasizes the importance of incentives for innovation and technological progress. The theory suggests that individuals and firms will be more likely to engage in research and development and introduce new technologies if they can expect to receive higher returns and profits from their efforts. This implies that greater rewards lead to more technological advances, as stated in option C. Option A is incorrect since improvements in labor productivity are one measure of technological growth. Option B is incorrect as the growth rate of new knowledge is considered more important than the growth of physical capital in the new growth theory. Option D is incorrect as the new growth theory does not suggest that government involvement in deciding which technology to pursue results in more technological advances.

An Important Foundation of the New Growth Theory Is That